Claim Mistakes, Complaints and Official Sources
Life insurance nominee vs legal heir: Section 39 nomination, beneficial nominees and assignment
Who gets life insurance money in India: nominee, beneficial nominee or legal heir, how Section 39 nomination and Section 38 assignment work, and mistakes that delay claims.
When a policyholder dies, the insurer pays the nominee. Whether the nominee keeps the money depends on who they are. Under Section 39 of the Insurance Act, 1938 (as amended in 2015), if the nominee is the policyholder's parent, spouse or child (a beneficial nominee), they are entitled to the benefit for themselves. If the nominee is anyone else, such as a brother or a friend, they receive the money but the legal heirs under succession law or a will may be entitled to it. If there is no valid nominee, the insurer pays the legal heirs, which usually needs succession documents and takes longer. An assignment under Section 38 (for example to a lender) generally overrides the nomination. A policy under the MWP Act has beneficiaries instead of a nominee.
This guide belongs to the claim process and IRDAI timelines guide. Succession disputes can be complex; consult a lawyer if heirs disagree.
Nominee, beneficial nominee, legal heir: who is who
| Role | Who | What they get |
|---|---|---|
| Nominee | Person named by the policyholder to receive the policy money | Receives payment from the insurer, which gets a valid discharge |
| Beneficial nominee | Parents, spouse, children, or spouse and children, named as nominees | Entitled to the benefit in their own right, unless a court orders otherwise |
| Other nominee | Anyone else (sibling, friend, relative) | Receives the money, but may hold it for those entitled under the will or succession law |
| Appointee | Adult named to receive money for a minor nominee | Receives and manages the money until the nominee is an adult |
| Legal heir | Person entitled under personal succession law or a will | Gets the money if there is no valid nominee, or may claim it from a non-beneficial nominee |
| Assignee | Person or lender to whom the policy is transferred | Receives the money to the extent of their interest |
How nomination works
- You can nominate at the time of buying or at any time before the policy matures.
- You can name more than one nominee and specify shares.
- If the nominee is a minor, you should name an appointee; otherwise the money for the minor may need court-approved guardianship to be released.
- You can change or cancel a nomination by written notice to the insurer before maturity. A change takes effect against the insurer only once it is registered; insurers may charge a small fee for registering a change.
- If a nominee dies before you, the nomination for that person lapses. Name a new nominee.
- An assignment of the policy (other than to the insurer for a policy loan) automatically cancels the nomination.
Worked example: why the nominee's relationship matters
Illustrative. Ravi, unmarried, buys a ₹50 lakh term plan in 2019 and names his brother as nominee. He marries in 2022 but does not update the nomination. He dies in 2026.
- The insurer pays the brother, who is the registered nominee.
- Because a brother is not a beneficial nominee, Ravi's legal heirs under succession law (his wife, and possibly his mother, depending on the law that applies to him) may claim that the money belongs to them. The family may end up in a dispute or court case.
Had Ravi updated the nomination to his wife (a beneficial nominee), she would have been entitled to the money directly. Better still, a policy under the MWP Act would have placed it in trust for her and any children; see the MWP Act guide.
Assignment under Section 38
An assignment transfers the rights under the policy, wholly or conditionally, to another person or institution.
| Type | What happens | Common use |
|---|---|---|
| Absolute assignment | All rights pass to the assignee | Gifting a savings policy, or a lender taking full security |
| Conditional assignment | Rights pass but return to you or your nominee on a condition, such as the loan being repaid or your death | Securing a loan while protecting the family |
An assignment must be made by endorsement on the policy or a separate document, signed and attested, and notice must be given to the insurer, which records it. Insurers can decline to act on an assignment in some situations if they record their reasons, as provided in the amended Section 38. When a loan is repaid, ask the lender to reassign the policy, then register a fresh nomination.
When there is no valid nominee
If no nominee was named, all nominees have died, or a minor nominee has no appointee, the insurer pays the person entitled by law. It may ask for:
- A succession certificate from a civil court, or a legal heir certificate from the revenue authorities, depending on the amount and insurer rules.
- An indemnity bond and no-objection from other legal heirs.
- The will and its probate, where applicable.
These can take months. Keeping nominations current avoids them. See the death claim documents guide.
Mistakes to avoid
- Not updating the nominee after marriage, divorce, the birth of a child or a nominee's death.
- Naming a minor without an appointee.
- Leaving nominee details incomplete: no date of birth, wrong spelling, no relationship.
- Assuming that a will alone decides who gets the money. The will matters, but the nomination decides who the insurer pays first. Align the two.
- Forgetting that an assignment to a lender cancelled the nomination; after the loan is closed, nominate again.
Annual check
- Log in to the insurer's portal or your e-insurance account and confirm nominees for every policy.
- Check shares add up to 100% where you named several nominees.
- Confirm the nominee's bank and KYC details if the insurer allows you to record them.
- Tell your nominee about the policy. A nominee who does not know a policy exists cannot claim it.
Use the term insurance checklist to keep these points in one place.
Nomination problems are among the most common causes of delay listed in the death claim documents guide, and a dispute with the insurer about who should be paid can be taken to the Insurance Ombudsman.
Frequently asked questions
Can I name my fiancée as nominee?
Yes, anyone can be named. But until you marry, she is not a beneficial nominee under Section 39. Update the nomination after marriage.
Does a nominee have to pay tax on the death claim?
No. A sum received on death under a life policy is exempt. See tax on life insurance payouts.
What if the nominee and the policyholder die together?
The policy money then goes to the policyholder's legal heirs, through the process described above. Naming several nominees, or contingent arrangements through a will, reduces this risk.
Sources
- India Code — Insurance Act, 1938 (Sections 38 and 39 as amended by the Insurance Laws (Amendment) Act, 2015)
- IRDAI — life insurance FAQs on nomination and assignment
- Your insurer's nomination and assignment forms and policy servicing pages
